Will OCC Kill the Alliance-Blackstone Deal?

The private-equity firm claims the government is placing unreasonable demands on the takeover; Alliance isn't so sure.
Stephen TaubJanuary 28, 2008

It looks like another private-equity deal is falling apart. Alliance Data Systems said its $6.6 billion acquisition by The Blackstone Group is in jeopardy because the Office of the Comptroller of the Currency may not approve it.

The credit-card processor said it received a notice from Blackstone after markets closed on Friday, stating that the OCC is “demanding that extraordinary measures” be taken by ADS and various Blackstone entities that “represent operational and financial burdens that cannot be reasonably assumed.”

The OCC is not commenting on the deal, spokesman Kevin Mukri told CFO.com.

Alliance did not provide further details about the nature of those measures. However, it accused Blackstone of being unwilling to satisfy them. Blackstone, according to Alliance, expressed a belief that alternative solutions that would be acceptable to Blackstone would not satisfy the OCC, and therefore that further negotiations with the OCC would be futile.

Alliance said it “strongly disagrees” with Blackstone’s assertion that the OCC’s most recent written proposal to Blackstone was the OCC’s final position on the matter. The OCC regulates companies with national bank charters, two of which are Alliance Data subsidiaries — World Financial Network National Bank and World Financial Capital Bank.

In addition, the the credit card company said, Blackstone’s notice did not claim Alliance had breached the merger agreement and acknowledged that the company had used its best efforts to obtain OCC clearance. Alliance also said the notice did not take issue with Alliance’s financial or operational performance or the liquidity of Alliance or its banks.

Blackstone reiterated its interest in acquiring Alliance, according to anAssociated Press article. It reportedly said the OCC had slapped “unprecedented and unacceptable financial and operational requirements” on the acquisition, but it stands ready to create a new agreement to be submitted to the regulator.

Over the past few months, private-equity firms have decided not to complete agreed-upon acquisitions of a number of companies, including Sallie Mae, Harman International Industries, and United Rentals.

4 Powerful Communication Strategies for Your Next Board Meeting